What’s Your Pricing Question?

The most important number in any business is the number on its price tag. But pricing is more than just a number. Much, much more.

When evaluating where companies sit on my “Roadmap to Best in Class Pricing”, I assess pricing excellence along eleven critically important dimensions, none of which have anything to do with the numbers on a price tag.

Those dimensions include:

a) executive commitment

b) people

c) strategy

d) processes

e) product offerings

f) communications

g) customer segmentation

h) data, knowledge and information

i) tools

j) discounting and

k) controls.

With so much to consider beyond just the price point, is it hardly surprising that there is no such thing as the perfect pricing organization, never mind a league table of the companies most admired for their pricing?

Since re-launching PricingProphets.com almost three months ago, the one question we have not been asked is “what price (numbers) should we put on our price tag?”

But we have helped take the stress out of, and provide clarity around, pricing, for numerous companies as they commence their journey to pricing optimization and excellence. We’ve done that by answering the following questions for them…

  • What is the best pricing for our branding & positioning in the market?
  • How do I design my pricing page to optimise perceptions of value?
  • How do I design my menu to optimise perceptions of value?
  • Is our pricing model appropriate for our market?
  • How can we tell if our introductory offer is appropriate?
  • How can we tell if our introductory offer devalues our product?
  • We’re proposing 3 different pricing options. Is this sufficient?
  • Should we use price incentives or value-adding offers?
  • How often can we realistically adjust our prices?
  • What is the best way to determine if our price position is cheap?
  • What is the best way to determine if our price position is expensive?
  • What is the best way to present our pricing?
  • What is the best way to leverage our pricing for media attention?
  • We’re getting beaten on price: what strategies can we develop to overcome this?
  • We need to raise prices: what are your tips on doing this?
  • How do I get non-paying customers to start paying?
  • How do I create a value-based pricing model?
  • How do I simplify my entire pricing model?

Your products and services are not the same as your competitors. Neither are your costs, your channels to markets or your customers.

Your pricing questions may also be different to those mentioned above. But whatever the question, we look forward to answering them for you in 2016.





How to Win Price Negotiations on Value

How often do you experience a situation similar to the one below?You have been working a prime sales prospect for the past six months. Your product is the ideal solution, you have done a great job of selling the value and you have carefully calculated a value-based price point for this prospect. But, despite your very best efforts at winning the deal, the buyer is asking for a lower price.



What do you do next?

Trade Value

Let’s step back for a moment and look at the physics of selling and buying. Think of the economic relationship between seller and buyer as a balance between benefits and price. On one side are the benefits delivered by your solution. On the other side is the price the customer must pay to realize these benefits.

The goal of any win-win sales situation is to maintain a fair and even balance between price and benefits. If benefits are increased, they will outweigh the price and disrupt the balance. Likewise, an increase in price will outweigh the benefits and disrupt the balance.

When a buyer asks for a lower price, he or she is effectively disrupting the balance in value. A lower price essentially tilts the value in favor of the buyer.

In order to maintain balance in the value equation, when the buyer asks for a lower price, we can respond with a resounding “Yes!” …with a caveat. We must remove something from the benefit side of the equation to maintain the balance in value. Essentially, we are reducing the benefits of the product for the lower price.

Look for product features, services, delivery schedules, warranties, payment terms or lower-priced product alternatives as sources for reducing value. Remove or reduce these value features to decrease the delivered benefits. From a negotiation standpoint, the trade for value does not necessarily need to be completely equitable. You just need to communicate to the buyer that there is a “price” to be paid for a lower price. Lower prices are not free.

Buyers often expect lowered prices from suppliers because the seller has historically trained the buyer to agree to lower prices without concessions. Your job is to train the buyer to expect a trade in the benefits delivered in return for a lower price.

Smart salespeople will be prepared for this type of value-trading discussion. Identify items in your proposal that you can remove if the buyer pushes back on price. Be prepared to tell the buyer what items can be removed from the proposal at the moment the buyer asks for a discounted price.

We find, in many cases, that the buyer is not willing to sacrifice any component of the proposal and agrees to the full price.

Empowering your sales team with this negotiation strategy helps you strengthen the perceived value of your brand as you ensure healthier margins. Once buyer and seller agree to place value over price, you will discover how easy it is to hold the line on price and build more profitable business relationships.